Healthcare Reform: Implementation Timeline

Summary

Beginning now, and through the first three years of implementation, Health Care Reform will largely involve new taxes, fees and mandates on individuals and small business. Actual changes to healthcare systems do not take effect until 2014 and later years. This summary covers a high-level view of the provisions in the Patient Protection & Affordable Health Care Act (H.R. 3590) signed by President Obama on March 23,2010, and the subsequent Reconciliation Bill (H.R.4872) passed by the Senate on March 25, 2010. Obviously, not all provisions of the bills are included. For specific questions, regarding the impact of Health Care Reform on your business, please contact an attorney from Day Ketterer at 330.455.0173 to assist you.

Effective Immediately

• The Department of Health and Human Services (HHS) will establish a process for federal review of fully insured premium rate increases.

• Small business (fewer than 25 employees) can qualify for tax credit at 35% that will increase in 2014.

• Coverage maintained under collective bargained coverage ratified before March 23, 2010, all new coverage and cost-sharing rules apply upon the termination of the last CBA relating to the coverage.

In 90 Days

• An Internet Portal for small businesses established by July 1, 2010 to shop for health insurance.

• Tax on indoor tanning salons (10%).

In 90 Days Through 2013

• Temporary reinsurance program established for early retirees over age 55 and not eligible for Medicare. Funded by the Federal Government with $5 billion. Employers reimbursed 80% of retiree claims between $15,000 and $90,000.

• High-risk insurance pool funded by the Federal Government with $5 billion to help adults, with preexisting conditions, obtain coverage.

Beginning September 23, 2010 (Six months from enactment)

• Group health plans, including self-insured plans will be required to provide transparency disclosures detailing: 1) claims payment and policies and practices; 2) periodic financial disclosures on enrollment, disenrollment, claims denied and rating practices; 3) information on the cost-sharing and payments with respect to any out-of-network coverage; 4) information on enrollee and participant rights under the bill; and 5) other information required by the Secretary of HHS.

• Plans must annually report to HHS and to eligible participants the benefits plan's initiatives to improve health, such as case management and wellness activities to ensure quality.

• The plan administrator must prepare and distribute a summary of coverage to all eligible participants, both at the time of initial enrollment and during the annual enrollment process.

• Elimination of annual and lifetime limits on benefits.

• Prohibits exclusion based on preexisting conditions for children 19 years and under.

• No rescission of coverage except when the covered person committed fraud or intentionally misrepresented a material fact.

• No deductibles or co-pays for preventive care as recommended by the U.S. Preventive Services Task Force.

• Mandates coverage of married and unmarried children until age 26, if no other access to care through other employer. Premiums are a tax-deductible business expense and not taxable income for employee.

• Appeals will have new minimum requirements for internal and external claims procedures.

• Patient protections allows for in-network PCP choice (including OB/GYN and pediatrician) if the plan requires the designation.

• Prohibits prior authorization or increased cost-sharing for emergency services.

• Nondiscrimination rules are extended to fully-insured plans and prohibit plans based on employee's eligibility or continued eligibility on hourly or annual salary.

• Seniors will receive $250 to fill Medicare Part D prescription drug gap (doughnut hole).
Fiscal Year 2010

• Expansions of community health centers and school based clinics.

• Graduate medical education expansion for training to increase numbers of healthcare professionals.

2011

• New W-2 reporting requirements.

• FSAs cannot be used for reimbursement of over-the-counter drugs other than insulin (this limitation also applies to HSAs and HRAs). Tax increase of 5% on nonqualified withdrawals.

• Reporting of medical loss ratio (MLR) must meet minimum standards or provide rebate payments to enrollees. Ratios at 85% of large group premiums and 80% of individual and small group premiums on medical services.

• By March 23, 2011 HHS and the National Association of Insurance Commissioners must develop a Uniform Explanation of Coverage.

• Studies conducted by HHS to monitor health care market purchases by employers and adapt employer reporting requirements appropriately.

• Tax on pharmaceutical manufacturers goes into effect.

• Five year demonstration grants for tort reform become available.

• Medicaid Advantage Plan funding.

• By March 23, 2011 Federal funding for State-based exchanges becomes available.

2012

• Comparatitive Effectiveness Fee imposed on individual and group health plans to fund comparative effectiveness research ($1 per participant through 2013; $2 per participant through 2019).

• Medicare claims data available for purchase to evaluate provider performance measures on quality, efficiency, and the effectiveness of care.

• Employers must provide 1099 or all corporate service providers receiving more than $600 per year for services or property.

• Hospital care payments linked to qualify outcomes.

2013

• Employers are required to provide employees notice of the State-based Exchanges to become available in 2014.

• Elimination of Medicare part D subsidy tax deduction.

• Increase in medical expense deductions from 7.5% to 10% except for persons over age 65.

• FSA contributions limited to $2,500 per year.

• Medicare hospital insurance tax applied to employees increases from 1.45% to 2.35% for high income earners. A new 3.8% tax on net investment income ($250K for joint filers; and $200K for others).

• By July 1, 2013, federal grants and loans to establish non-profit, member-run health insurance co-ops become available in all 50 states.

• New excise tax of 2.3% on the sales of medical devices is imposed.

• Taxability of RDS payments to employers.

2014

• Establishment of State-based Exchanges for small businesses and individuals. Large employers can participate in 2017.

• Small business tax credit up to 50% for purchasing health insurance through the exchange.

• Health insurance industry tax starting at $8 billion in 2014 and increasing to $14.3 billion in 2018.

• Exchange reinsurance program tax of $25 billion on insurers and TPAs from 2014 to 2016.

• Elimination of annual limits and preexisting exclusions for any person of any age.

• All employers who apply for health care coverage will be guaranteed acceptance.

• Prohibits waiting periods in excess of 90 days.

• Medicare and Medicaid DSH payments begin to be reduced.

• Expansion of wellness incentives to 30% of total coverage costs and up to 50% with HHS approval.

• Essential benefit plan levels must be offered by exchanges, individual and small group markets.

• Various Pay-to-Play penalties are imposed based on non-offering of health care coverage, minimum employer coverage requirements, and employee vouchers for exchanges.

2018

• New excise tax on high-value "Cadillac" health plans at the rate of 40% on amounts over $10,200 for individuals and $27,500 for family plans, paid by insurance companies and plan administrators.

Additional Administration

• HHS is required to adopt a single set of operating rules for electronic transactions to create uniformity. Group health plans will have to certify compliance.

• Creation of a new government-run voluntary long-term care insurance program (CLASS Program) which employers must automatically enroll employees and facilitate payroll deductions unless the employee opts out.

For more information please attend the Healthcare Seminar this June 2010.